Inflation across the eurozone soared to its highest rate on record in November, as already-high energy prices continue to rise, official data showed Tuesday.
Consumer price growth in the 19 countries sharing the euro accelerated to 4.9% in November, according to the data from Eurostat, the European Union's statistics agency, by far the highest level in the 25 years since the figure has been compiled.
It was up from 4.1% a month earlier and well ahead of expectations for 4.5%.
The inflation spike in November is said to likely mark a peak before a slow decline that will keep it uncomfortably high for much of the next year.
Like others, the eurozone is enduring big price hikes as a result of the economic recovery from the coronavirus pandemic and blockages in supply chains.
Across the eurozone, inflation is running at multiyear highs, including in Germany, Europe's largest economy, where the annual rate has hit 6%.
Energy prices in the eurozone were up 27% compared with a year earlier as oil prices soared but inflation in services and nonenergy industrial goods, a drag on price growth in past years, were both above 2%, suggesting a rapid rise in underlying price pressures.
Although inflation is now more than twice the European Central Bank’s (ECB) 2% target, it is unlikely to trigger any policy action, even if the data makes for uncomfortable reading and could trigger political pressure on the ECB to rein in price growth.
The ECB has long argued that the inflation surge is temporary, caused by a range of one-off factors, and will subside over time, so policy action now would be counterproductive as it would thwart economic growth just when inflation eases on its own.
While some policymakers have warned that high inflation, even if temporary, could trigger a surge in wages, ECB President Christine Lagarde and chief economist Philip Lane have dismissed this argument, saying that wage growth remains anemic, and there is no sign that firms are permanently altering their remuneration behavior.
Indeed, the ECB has promised continued stimulus with bond buys and record low rates throughout 2022, even as a long list of central banks around the world are already tightening policy.
The potential headache is that inflation will now take months to drop and could stay above the ECB's target until the second half of 2022, a communication challenge for a bank that has struggled with low inflation for a decade and has little experience with price growth above its target.
Underlying prices, a key focus for policymakers to exclude volatile food and energy prices, also surged.
Inflation excluding food and fuel prices and a narrower measure that also excludes alcohol and tobacco products both rose to 2.6%, well ahead of expectations for 2.3%.
Although both of those figures were high, Lane has dismissed these readings in recent weeks, arguing that post-pandemic factors skew them and so are not accurate gauges of actual underlying price growth.
In addition, the recently discovered omicron variant of the coronavirus has prompted some uncertainty over the global economic outlook, and as a result, central banks around the world are expected to hold back from announcing any big policy changes soon.
Many economists think the inflation spike over recent months will reverse next year as base effects linked with the sharp fall in prices during the pandemic last year, primarily of energy, are stripped out from annual comparisons.
The ECB will next meet on Dec. 16, when it is almost certain to end a 1.85 trillion euro ($2.10 trillion) emergency bond purchase scheme but will likely ramp up other measures to make up for the lost stimulus.
Records started being compiled about the euro two years before its actual launch in 1999. For the first three years of its existence, it was an invisible currency that was traded on foreign exchange markets and used for accounting purposes and electronic payments.
In 2002, euro notes and coins first came into circulation, replacing historic currencies such as the French franc, the German deutsche mark and the Italian lira.